How Westchester Businesses Survive — or Not — in Emergencies and Natural Disasters
Mastering disaster: For companies large and small, a business continuity plan ensures better chances of recovery.
After a disaster in Westchester County, whether it is a fire, winter storm, flood, hurricane, or even a labor strike, there are always more than a few business owners trying to put their livelihoods back together. After Superstorm Sandy, the editors of The Daily Voice, an online-based community news organization headquartered in Rye, were forced to shut down its websites for days, no doubt losing readers and advertisers, because its servers were submerged in thigh-high water in lower Manhattan.
Just a year earlier, Hurricane Irene took its toll, nearly obliterating Velocity Sports Performance, an athletic training facility in Elmsford, by destroying $200,000 worth of equipment and its newly completed, $400,000 building extension. “I just couldn’t believe it,” says Brian Fee, president and owner of Velocity’s Elmsford facility. “The water was so high, and the equipment—and we have heavy, heavy equipment—was just floating around the space. For a small-business person, it’s your life. You’re looking at it, and it’s very difficult, very emotional to see it all gone.”
Floods are certainly not the only disasters to strike Westchester. In July 2006, a freak tornado (the last one to hit the Hudson Valley was in 1995) nearly demolished California Closets, a store in Hawthorne that sells custom closet organizing and storage systems.
The 2003 blackouts that permeated much of the Northeast took a particular toll on Longford’s, which sells its “own-made ice cream” out of its stores in Larchmont and Rye. Once the power went out, “we lost everything,” says Christine Vita, the store’s current owner. Not only did the ice cream spoil in the non-working refrigerators, all the ingredients melted, ruining the floors and cabinets as well. It took two weeks—and a lot of financial loss—before the store was up and running again: “I was really, really stressed out,” says Vita.
While these narratives are upsetting, what is even more disconcerting is that many businesses, particularly smaller ones, don’t survive the catastrophes. A study by the Insurance Institute for Business & Home Safety claims this figure is as high as 25 percent. Admittedly, some of these companies were already at risk before the disaster, says Thomas Morley, regional director of Westchester’s Small Business Development Center. “Maybe the business was struggling beforehand and that’s sort of the death blow for them, the natural disaster,” he says. “There are folks who simply decide they can’t deal with it anymore, and they just load up and move on.”
But other companies that don’t survive are stable—that is, until a disaster forces them to close down for a few days. “It starts with your customers’ perception of you,” explains Gregory Tellone, chief executive officer at Continuity Centers, a disaster-recovery consultancy with a branch in Chappaqua. “If your lights are out, your phones are down, and your computers are down, that reduces their trust in you as their supplier, and if you can’t deliver what they are buying from you, they will call your competitor who is five miles away who has power.” That explains why a study conducted by the Small Business Administration shows that 80 percent of small firms that are closed for five to 10 days after a natural disaster go out of business within the year. (Larger companies, with much deeper pockets, have the funds to survive these crises and aren’t as vulnerable).
Of course, it doesn’t have to be this way. That’s why there’s business continuity planning. That’s what businesses call taking actions that will keep their company functioning in the face of adversity, and the practice first became a hot topic after the September 11th terrorist attacks when “Congress told the financial sector that they have to transact business and keep the economic lifeline of the country pumping,” says Jim Parker, director of the American Red Cross for the greater New York region.
When the financial sector created the most “pristine, comprehensive, detailed, polished plans you ever want to see” to keep their businesses up and running, says Parker, “other industries started applying their tactics. A large motivating factor for this was the growth of technology. The more a business used technology, the more money the company could make in a short amount of time. But that also meant that when technology wasn’t available—perhaps because of a power outage—the company lost more money. “As technology speeds up the way people think and their ability to work, it makes them more vulnerable,” says Tellone. This means that preparing for a disaster is the “difference between winning and losing,” he says.
Now, especially after the recent mega-storms, there is an abundance of information for companies seeking help with their business continuity plans. New York has a Contingency Planning Exchange, where business leaders discuss ideas for emergency management and planning with one another. The Red Cross and the Small Business Association give free seminars at community centers on the topic. For more individualized advice, firms can hire experts from financial institutions or consultancies such as Continuity Centers in Chappaqua. Other businesses, such as the DoubleTree by Hilton Hotel, ask their insurance agents for guidance. A flash flood had caught the hotel in Tarrytown off guard in June 2005, when a tiny creek overflowed into the hotel, leaving the establishment with a multi-million-dollar cleanup bill. “No one anticipated it, and it could have been prevented had people been keeping an eye on that little thirty inches of water,” says hotel General Manager Richard Friedman. But he’s found his insurance agents quite helpful. “They’ll do an inspection of the property and tell you what they think should be addressed.”
The general process of preparing for a natural disaster is simple: First, companies decide which functions are critical for their business. Then, they create a Plan B and a Plan C to ensure each function gets done even if a natural disaster gets in the way.
For example, let’s assume a lawyer’s most essential function is to communicate with clients and judges. To do that, he or she needs access to email, a phone, and important documents about individual cases. So what happens when the power goes out and the lawyer no longer has an Internet connection or a working phone line? Or a big flood destroys the hard copy of a client’s casework or the computer system that houses the electronic copy?
“There are a number of simple steps people can take to be prepared for disasters,” says Morley. In this case, preparations could include ensuring that the lawyer has a smartphone (with extra external batteries) that is connected to a work email and updated with all contacts, and a USB flash drive attached to his keychain that holds important client documents. The lawyer can also invest in battery backup in his or her office that will run computers long enough to shut them down without any loss of data. And if the firm has deep enough pockets, it can also take more complex steps, such as investing in a generator, making arrangements to work in an offsite location in case he or she can’t get into the office, and setting up remote servers so all data is stored in an additional location. If this all seems like common sense, it is. “It’s all about making sure you have what you need,” says Tellone.
For other industries, their equipment or venue, rather than their services or actions, is what needs to be protected. That is why, after the 2005 floods, the DoubleTree installed a system of floodgates that can be activated before any storm. “The moment we anticipate any kind of wave, we have an internal alert and everybody knows the areas they have to keep an eye on,” says Friedman. “It’s not rocket science, but we have six floodgates that basically seal off a hallway or an area of the hotel.” Similarly, the managers of Velocity Sports Performance rent a truck and move all their expensive equipment away from potential flood sites if a hurricane is nearing.
There is also the issue of what happens if preparations prove inadequate, and the company needs money to replace its equipment, rebuild its venue, or even relocate. Insurance policies and small business loans provide for a lot of these losses, but they require documentation such as tax returns and financial statements, which “can’t be under four feet of water,” says Morley. Companies should take regular photographs of all merchandise and store offsite copies of insurance policies and lists of inventories. If a company carries business interruption insurance, it also needs records to support lost sales figures, continuing fixed costs, and extra expenses related to the storm. Business leaders should also read their policy closely to “know what it is that you are insuring and what it is that you can reasonably expect,” says Morley.
All the experts, however, agree that the most important preparation is to get staff ready for a disaster. “What the disruptions that people in small companies overlook sometimes is with personnel,” says Morley. “If you only have three people in a business—if one person has something unfortunate happen to them, that’s thirty percent of your workforce—how are you going to replace that?” Tellone recommends cross-training staff so multiple people can perform any vital function. That way, if one person can’t get to work (maybe a tree blocked their driveway or they have to stay home with their kids who are out of school), another person can take over.
It is also essential, says Parker, to fill staff in on business continuity plans. That means not only ensuring every employee knows exactly what he or she is supposed to do if there is a disaster, but also performing regular drills that force staff to walk through what happens in a crisis. “The group that has had the training performs better and recovers quicker because they have the confidence,” says Parker. “There is the sense that ‘I’ve had some training, I’ve had some background now, I’m going to be okay through this and come out the other side.’”
You would think that with all the destruction Westchester County has seen in the past few years, and with the great stakes of not doing so, all businesses would make disaster preparedness and business continuity a priority. In reality, however, many do not.
Some businesses think it is too expensive or complicated to prepare for disasters or feel that they would rather take a risk than focus their limited resources on something that might—or might not—happen. This idea is reinforced by the fact that we, as humans, don’t really seem to calculate risk well, says Parker. Just as studies show that smart, rational-thinking individuals believe they are less likely to get a divorce or have a heart attack than their peers, companies think they will be the ones somehow spared from disaster.
Our beliefs are also influenced by the current media climate. Superstorm Sandy notwithstanding, most disasters drop off the front page almost as soon as they appear, causing individuals to lose focus on needing to prepare for them. “We work during the halo of an event to reach out to people and try to galvanize them [once they] see what can happen,” says Parker. “But five days out, a news cycle rolls over. That is about the amount of time we, as organizations, have to convince people about the importance of being prepared. After that, people go back to default mode, and it’s very difficult to keep them focused.”
Tellone is a little more blunt about the situation: “I don’t think this is something you can convince companies they need to think about. They either do or they don’t, and they will either survive the next disaster or they won’t.”
Alyson Krueger is a freelance journalist based in New York City. She’s contributed to the New York Times, Village Voice, Wired, and the Jewish Daily Forward, among other publications.